Coldwell Banker United, Realtors (512)406-1301

Monthly Archives: May 2014

Sorry it’s been so long guys–10 days is not a normal lapse for me–but the busy season is picking up at the office–especially in the form of leases!

Not everyone is ready to commit to buying–whether that be waiting on a job contract, or working on your credit, or perhaps your just not ready to commit to home ownership as a whole. Hey, I get it–and the thing is, not everyone buys a house–plain and simple.

Since the leasing market is just as crazy as the buyer/seller’s market out there in Austin today, I thought I would quickly touch on the facts of leasing-and what you need for your application. That way, just like in my buyer’s guide–you’re ready to submit an application when you’ve decided on the home you love.

Might I add, without sounding like a skeevy insurance salesman—if you’re looking at rental homes–call a Realtor. You don’t pay us to find you a home–your new landlord does–and we can help and represent you along the way. I am honestly here to help. 🙂

You will need an application for each person over the age of 18 living in the leased home. Of course, some agencies/property management/landlords have their own applications they’ve made. Talk to your Realtor and double-check what the property you’re interested in requires.

2)Copies of your ID/Driver’s License

Again, a copy of an ID for everyone over the age of 18 that will live in the home. Get these copied and to your Realtor ahead of time, and we can hold onto them until you’re ready to send in an application.

3)Sources of income

So, yes, you need income to rent a home–go figure! The best thing to do ahead of time is have some paycheck stubs ready. Generally, two months worth–though some companies are fine with one-again, check with your Realtor about the property you are interested in.

If you SELF EMPLOYED-get a copy of your most recent tax return ready to go. Usually with Turbo Tax you can download a PDF version of it-and hold onto it and email to your Realtor when ready.

For a lot of folks, you’re new to the Austin area–and maybe even haven’t received a check yet. Usually, you can get a letter from your new employer stating what your wages will be.

4) Application Fees

The fee is going to vary from property to property-and generally the application fee is non-refundable–always a bummer. The application fee with apply to each person over the age of 18. So, if the fee is $50/person, and you’ve got three folks in their 20s–that’s $150 you need to submit with the applications and IDs. Generally, a Money Order/Cashier’s Check is the best way to do this–and they can be done at your bank or even the customer service desk at HEB or Randall’s. These checks are certified, and guaranteed payable–which is why property managers/landlord request them.

Sometimes the security deposit will also be due at the time of application. In this case a second cashier’s check/money order should be submitted with the applications for (almost always) one month’s amount of rent. Again-this varies property to property–so double-check with your Realtor.

5)Submit application and wait!

Once you’ve decided on a home, filled out your applications, have your IDs copied and all your checks ready–get your Realtor to submit everything. From here, things tend to move a lot faster then the home-buying process I spoke about weeks ago–but some similar things happen.

-Check the income–generally most landlords/property managers like to see 3x the months rent–so if the rent is $1000/month, you should be making about $3000/monthly.

-They’ll also check your background–look into any criminal convictions–obviously, if you have a record and you feel you need to explain what happened–you can submit a letter of explanation along with the applications. Minor offenses with some time behind them may be overlooked.

6)THE OUTCOME

Usually applications are approved in about 3 days–give or take a holiday or weekend. Your awesome Realtor should call you can give you the news and set up times to get your actual lease signed-get your security deposits and first month’s rent checks(depending on the landlord/property manager) to the landlord/property manager, and get your keys!

Questions about renting in the Austin/Round Rock and surrounding areas–shoot me an email/call/text–I’d be happy to help you out. I’m helping a few different awesome families get into lease homes currently–and would love to be there for you.

Right off the bat, it seems like to me a lot of people think FHA is for folks with terrible credit, or people who will default on their loan—I don’t know, everyone that has asked me questions about FHA seems to have negative feelings about it—and that’s not the case.

FHA is just another loan alternative that helps folks that have the credit and can pay a mortgage, but don’t have a ton of money to put down. Super awesome for first-time homeowners—my husband and I went FHA when we bought our house, and I have zero regrets about it. It just seems like people are misinformed. Keep in mind, I’m not a lender—so for more detailed questions, speak to your lender, and if you don’t know of one, let me help you find a good one 🙂

Okay, ready? Onward!

1) What is FHA?

FHA is the Federal Housing Administration. FHA loans are INSURED by the Federal Housing Administration, however, they are NOT the direct lenders of the mortgages. In order to get an FHA loan, you have to go to an FHA Qualified Lender.

2)What does all that mean?

So, in the most basic of explanations, when you decide to go with an FHA loan, it is subject to a Mortgage Insurance Premium-MIP.

Here’s the deal:

Up front, if you put anything less than a 20% down payment on your loan, you will pay 1.75% in insurance due at closing. So let’s say you were buying a $200,000 home—and you were putting 5% down, so that’s $10,000—which means you’re getting a loan for $190,000. 1.75% of that is $3325—so you’re looking to tack that on up front at closing. And not everyone has this type of cash lying around, which is why they allow it to be rolled into the actual loan.

That’s not all with MIP, thereafter you will have a premium due, which generally will just be tacked onto your monthly mortgage bill. This will depend on how many years your loan is for, generally 15 or 30 year, and it will also depend on your loan to value ratio for the mortgage. Talk to your lender about all your options—but just be aware that there will be MIP on your loan.

3) Are there limits to the amount of loan I can take out with FHA?

Yes, there are indeed lending limits–and it depends on where you live.

In the Austin/Round Rock/Williamson area for example it’s $305,900 for a single family home. In San Francisco it’s something crazy like $600k something-rather. But of course, it’s more expensive to live out that way, so the max limits are adjusted for area.

4) How much do I need for down-payment on an FHA loan?

Down-payments can be pretty low—down to 3.5% minimum. It’s good to know that you should have at least a 580 FICO score to consider doing 3.5% down. You can still get an FHA loan under 580 FICO, put you should look at having a 10% down payment ready. You also want to make sure any unpaid accounts on your credit score are up to date.

To go along with that, unlike other loans, your down payment for FHA can be gifted without a penalty. Just in case you have some super generous family members….

5) How much debt can I have to apply?

With FHA your debt to income ratio can be higher, and usually you loan will be considered with a 43% debt-to-income ratio. Here, we’re looking at your gross-pre-tax income. So, say you make $40k a year before taxes, divide by 12 and we get your monthly income, $3333.33. From there figure out your monthly recurring debt—all bills you pay. So let’s say credit cards, car payment, phone bill, ect—you pay about $600 a month.

Then you look at your possible new house payment, let’s say you’re looking at a $800 payment on your new home.

Add the 800 and 600 together. $1400. Divide that number by your monthly pre-tax income and you get 42%. In this case, it’s close, but you’d still be eligible for the loan.

See the latter half of question 4–Adding to that–For this next part—I’m not a lawyer—but I was asked about this and here are the most basic facts I have in terms of Credit:

-As far as credit goes, you should have 2 lines of credit open.

-You can still apply for FHA with a Chap 13 bankruptcy, as long as payments have been made and verified for one year. You’ll also need the court trustee’s written approval to proceed with the loan. The borrower should also be ready to give a full explanation for bankruptcy with loan application, reestablished good credit, and good job stability.

-For Chap 7 bankruptcy, you have to have at least 2 years past from the discharge date. From there everything else from a Chap 13 bankruptcy application.

-If you have any questions or concerns-ask a lawyer. It is harder to get a loan out of bankruptcy but it happens.

-Late payments are looked at by a loan underwriter along with past patterns of payment. If there is a good pattern of payment, and there was a period of late-payments, your loan may still be considered.

-Collections SHOULD be paid off—but minor issues may not disqualify—though I think you’re best bet is to have everything paid up.

-Judgements have to be paid in full.

-Any federal debt-tax leins or student loans that are delinquent are not eligible for FHA.

So, I know that’s a lot to swallow—but FHA is a great option for a lot of folks who don’t have a ton of cash they are sitting on top of but are financially able to pay for a home loan.

Make sure you check out my guide “How the heck do I buy I house?”, especially Part I, when you are looking to get pre-approved for a loan—you’ll find a great list of everything you’ll need to prep for the mortgage lender. Seriously, be prepared—it’ll make it much less stressful for you!

AGAIN-KEEP IN MIND, GUYS–I am not a lender, nor to I try to pretend to be. Feel free to ask more questions, obviously, if I have the answer I’ll give it, but if I don’t–I know EXACTLY where to go.